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10/16/2011

“You can always count on Americans to do the right thing – after they’ve tried everything else,” said Churchill.In this article within The Economist, a new prescription for the poor is introduced.America’s healthcare system for the poor is in the process of being transformed.The typical process for Medicaid providers is to bill a fee for each service they performed on behalf of the patient.In short, the more services they provide, the more they bill and the more money they make.In that same moment, the more we as taxpayers pay into this system. Providers are incentivized to keep patients unhealthy, bill for more services and make more money.This is a win-lose. Many states are introducing “managed care” into their Medicaid systems.Managed care programs cap the rate for the care of its members based upon a pre-determined agreement between the state Medicaid system and providers.If someone gets sick, the healthcare costs rise and the provider’s margins reduce.Providers are given a huge incentive to keep their patients healthy.This is a win-win.Advocates of managed care also testify that costs are made more predictable.Not only is a greater investment and emphasis placed on preventative care, providers working under a cap find a way to work within that budget.Also, the greatest change will come in improved patients’ health, standard of living, and longevity.The text (page 89) also introduces the economic benefits of managed care systems.The costs associated with the typical Medicaid pay-per-service systems are unpredictable and extremely variable.The managed care blueprint shifts the costs to a predictable, agreeable fixed amount.

I agree with Thomas. States need to move towards the managed healthcare vs the normal unlimited amount of healthcare benefits that so many Americans use today.

There needs to be some kind of cap on the amount of coverage. I don't think that it should be a predetermined rate for each individual or family. I think that it needs to be evaluated case by case. Some individuals with health problems will need more. Whereas others may need very little and may not ever use it.

I really think this is a serious issue and its getting a little out of hand. Every state should have managed based healthcare when it comes to medicare. Or figure out a plan on a Federal level so that these plans can be used in each state without any major issues.

1) Tom: local time doesn't matter. What' matters is the time I receive the confirmation e-mail from Google. This is on the syllabus. So these will count as Block 4.

2) I will accept your correction since you spotted it first. FYI: if you log in to Blogger, on your dashboard is a link to "Edit Posts" under this blogs name.

3) Both of Thomas' comments are editorial and won't be counted for credit.

Jack's comment first: there usually are limits (typically $2M) that an insurer will cover over your lifetime.

Back to Thomas: this is an application of the rules vs. discretion argument that Kydland and Prescott got their Nobel prize for. Politicians like to institute programs that rely on discretionary decision making, and then trusting people to avoid the moral hazards that this creates. It usually doesn't work out well.

There is some good information in the article, however I do not agree with what is being said. Thomas has tried to argue that providers are incentivized to keep the patients unhealthy, and from the information it would probably be better to state that the providers are incentivized to simply provide as many services as possible. I just don’t believe that providers are trying to keep their patients sick so that they can make more money. Thomas also stated that the fee-for-service is extremely unpredictable and varies, which is true, but the reason why fee-for-service has been used is because an individual’s road back to health is also unpredictable and varies. I work in the local healthcare industry and I am amazed and how quickly a person can progress and at how quickly that same person can decline. A person’s activity can vary from day to day or even hour to hour. In my opinion a set amount would slow the patient’s progression because even if the individual progresses and needs more therapy, for example, the provider would be less likely to provide it because of the shrinking revenues at that point. Then the provider is incentivized for keeping the patient unhealthy because the provider could keep the patient for a longer period of time.

I like the contrast between Thomas and Papa Smurf. This is what makes healthcare such a difficult policy problem.

I think Papa Smurf's correction of Thomas is correct.

But, both have missed an overarching issue: the better our healthcare, the more sick people we will have to treat. The reason is that with poor healthcare people die, and do not become future liabilities of the healthcare system. Every person who is made well continues to be a liability to the system, and often a bigger one if they've really dodged a bullet.